United States: Accidental Death And Dismemberment Case Update

Following is a summary of three recent and noteworthy Court of Appeals decisions upholding plan administrators' denials of ADD benefits, establishing a pattern of deference even in light of procedural errors which may be an outgrowth of the Supreme Court's decision in Conkright v. Frommert 130 S. Ct. 1640 (2010).

Sixth Circuit Declines To Re-Write Plan Terms

In the matter Hernandez v. Hartford Life & Accident Ins. Co. 2012 U.S. App. LEXIS 3293 (6th Cir. 2012), a husband and his deceased wife's estate sued seeking to recover benefits which they alleged were wrongfully denied following the death of the wife. Mrs. Hernandez died two months after suffering a leg fracture that was surgically repaired. It was undisputed that the cause of her death was a pulmonary embolism. The policy at issue expressly excluded coverage for death caused by "circulatory malfunction". The parties agreed that a pulmonary embolism is a circulatory malfunction. However, the plaintiff argued that the cause of the circulatory malfunction - relating to the broken leg - was accidental, so that coverage should not be excluded. The plan administrator disagreed and denied the plaintiffs' claim for benefits under the plan based on its determination that a pulmonary embolism was a "circulatory malfunction" and was not, therefore, an accidental event. The Sixth Circuit upheld the insurer's interpretation of the policy terms because the plaintiffs did not dispute that the pulmonary embolism was the immediate cause of the decedent's death even though the accident causing the leg fracture led to it. It was undisputed that the pulmonary embolism was a "circulatory malfunction," and that the plan terms specifically excluded from coverage a loss caused by a circulatory malfunction.

Tenth Circuit Finds No Prejudice Despite Error

In Brimer v. Life Ins. Co. of N. Am., 2012 U.S. App. LEXIS 2601 (10th Cir. 2012), claimants Kimberly Brimer and her sons, Matthew and Christopher Brimer, claimed entitlement to benefits under a group accident policy insuring their husband and father. Kimberly Brimer and her son Matthew returned from a weekend trip to find James Brimer dead in the family home. A death certificate indicated that the death was an accident caused by combined drug toxicity from ingestion of several prescribed medications. The insurer initially denied the claim under a policy exclusion for voluntary self-administration of drugs, but on an administrative review, it denied the claim on four grounds; (1) affirming the original determination; (2) finding no coverage because the death was not accidental; (3) finding that coverage was excluded as the death was intentional; and (4) finding that coverage was excluded because the loss resulted from sickness, disease or medical treatment thereof.

The district court concluded that LINA properly denied the claim, and the Brimers appealed, arguing that they were denied a full and fair review since they were not allowed to present evidence on the "medical treatment" policy exclusion upon which the defendant ultimately relied. On appeal, the Tenth Circuit found that the insurer violated the ERISA requirement of a full and fair review when its administrative appeal decision added a different policy exclusion as justification for denying the claim. Nonetheless, the court concluded that remand was not warranted because the claimants did not show that they were prejudiced. The claimants had conceded that the only relevant evidence was the policy itself, which was in evidence before both the insurer on administrative review and the district court at trial. As a result, the insurer's decision was upheld based on the evidence already before the Court.

The majority also found that the Brimers forfeited the argument that the medical treatment and the voluntary self-administration of drug exclusions conflicted and were ambiguous, which was the subject of a dissenting opinion.

Fifth Circuit Defers To Administrator's Interpretation

In another matter involving the same insurer and a death caused by self-administration of narcotics, Smith v. Life Ins. Co. of N. Am., 2012 U.S. App. LEXIS 2354 (5th Circ. 2012), the ERISA governed policy contained exclusions for death caused by suicide; sickness or disease (including mental infirmity); and voluntary ingestion of any drug unless taken in accordance with a physician's instructions.

Based on the scene and the autopsy, it appeared that the deceased had ingested multiple drugs, most (but not all) of which were prescribed. The Fifth Circuit concluded that LINA did not abuse its discretion in determining that the death fell under the voluntary ingestion exclusion and found that the district court erred in awarding benefits to the plaintiff. The Fifth Circuit noted that the lower court's decision did not afford appropriate deference to the plan administrator and mistakenly applied the doctrine of contra proferentem to construe the ambiguity in the term "voluntary" against the administrator. The Fifth Circuit further noted that LINA exercised reasonable discretion in interpreting the voluntary ingestion exclusion, and based on the undisputed facts surrounding the insured's death, i.e. that it was caused by an overdose of self-administered powerful narcotics, it was reasonable to conclude that it fell within the voluntary ingestion exclusion.

Each of the above decisions are encouraging for plan administrators and indicate propensity of the appellate courts to afford deference to administrators' coverage decisions, so long as their reasoning is not arbitrary or capricious.

In Hernandez, the court stated in closing, "[W]e cannot say that Hartford's decision is not rational in light of the plan's provisions. We cannot find that the decision is not the result of a deliberate, principled reasoning process or that it is not supported by substantial evidence. We cannot therefore hold that the decision is arbitrary and capricious. Even if we were inclined to do so, we simply have no liberty to rewrite the terms of the plan."

In the Brimer case, the court showed deference by dismissing the insurer's errors in its own administrative appeals process as non-prejudicial to the plaintiffs in light of the facts, holding that even though the administrative process was flawed and violated ERISA's requirement of a full and fair review, the denial of benefits was appropriate.

In the other accidental overdose case, Smith, the appellate court reversed the district court's initial grant of summary judgment in favor of the plaintiffs, once again deferring to a plan administrator's interpretation of its own policy, even when a more narrow construction of a specific term in the policy would result in the grant of benefits under the policy.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.